Basket

DEFINITION of 'Basket'

A single unit of at least 15 stocks that are used in program trading. Baskets are traded on both the NYSE and the CBOE for institutions and index arbitrageurs. Both instruments allow for the composite purchase of all of the stocks in the S&P 500 in a single trade. Baskets were created after the stock market crash in 1987 to better facilitate institutional trading on the index.

BREAKING DOWN 'Basket'

Basket was also the nickname given to a specific type of financial instrument that briefly traded on the Philadelphia Stock Exchange in 1989. This security was removed from trading due to regulatory controversy over its nature. The baskets that traded on the other two exchanges eventually also ceased trading due to poor volume.

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RELATED FAQS
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    A basket option is an option with an underlying asset "basket" of securities, currencies or commodities. Basket options are ... Read Answer >>
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    Learn about the history of the Chicago Board Options Exchange and understand the CBOE's central importance in the financial ... Read Answer >>
  3. How is the basket of goods selected for the Consumer Price Index?

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  4. What is the difference between arbitrage and speculation?

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